Indian IT Sector Bounces Back with Promising Growth in Q2FY26

The Indian IT sector rebounded in Q2FY26, with Tier-1 and Tier-2 companies showing promising growth. While Infosys and Wipro met expectations, Tech Mahindra exceeded them. Tier-2 firms led in growth, and offshore BPOs saw margin gains. Headcount rose, suggesting a stable demand outlook driven by potential Gen-AI investments.

The Indian IT sector experienced a resurgence in Q2FY26, as Tier-1 technology companies reversed their recent downturns, and Tier-2 firms continued to outperform in terms of growth and profitability, according to a report from Axis Capital. Major players like Infosys and Wipro reported growth aligning with forecasts, while Tech Mahindra delivered an unexpected positive performance.

Axis Capital's sectoral update highlighted that Tier-2 entities, including Coforge and Persistent Systems, led in sequential growth. Meanwhile, BPO-centric companies such as eClerx and Sagility maintained a consistent performance. The ER&D sector faced challenges, but Tata Technologies showed a positive surprise due to its non-automotive business.

Sector-wide margin improvements were noted, credited to currency benefits, postponed wage increases, and the absence of typical seasonal costs. Of particular note were the gains in offshore BPO margins. HCLTech held its EBIT steady at 17-18 per cent, Infosys at 20-22 per cent, with Sagility raising its adjusted EBITDA margin forecast after a robust first half. Workforce expansion picked up in Q2, hinting at demand stabilization. Most Tier-1 firms, except TCS, added staff, with Cognizant and Infosys leading in hires. The forecast for fresher recruitment is set to rise in FY26, in a trend similar to global counterparts like Capgemini. Strategic investments in Gen-AI are poised to further bolster IT companies' growth cycles in the near term.

(With inputs from agencies.)